Supreme Court To Examine Arbitral Tribunal's Power To Grant Interim Monetary Relief On Disputed Claims

The Supreme Court on Tuesday, 1 September, said it would examine whether an arbitral tribunal can grant interim monetary relief on disputed claims under Section 17 of the Arbitration and Conciliation Act, 1996.

A Bench of Justices P.S. Narasimha and Alok Aradhe issued notice on Larsen & Toubro Ltd.'s challenge to a Delhi High Court judgment which set aside an interim direction requiring India International Convention and Expo Centre Ltd. (IICECL) to release approximately Rs. 227 crore to L&T.

The judges indicated the case raises a “larger issue” on the scope of an arbitral tribunal's interim powers under Section 17, particularly whether it can issue positive monetary directions rather than merely preserve the subject matter of the dispute. They observed:

“This issue of the arbitral tribunal, not merely granting injunctions, as it originally was contemplated, to go further and give positive directions, will have to be considered.”

Senior Advocates Abhishek Manu Singhvi and Mukul Rohatgi, appearing for L&T, submitted that the amounts covered by SP-69 and SP-70 were certified and contractually payable. Referring to the arbitral tribunal's decision, Singhvi submitted:

“It's one decision by a tribunal that is headed by Justice Bookday, Justice Tahu, and a third member dissenting, not with sugar. It's on SP-69 and SP-70, which are clearly certified, with a clause saying that certified bills mandatorily must be paid.”

He also submitted that the distinction between certified and disputed claims was important, stating that “the clause says that claims, counterclaims disputed, not adjudicated, don't stand on the same footing as certified and admitted claims.” He further argued that “a Section 37 law cannot reverse a discretionary order in an interim stage of 17.”

Additional Solicitor General N. Venkatraman, appearing for IICECL, submitted that the claims forming the basis of the Rs. 227-crore direction were disputed and that the arbitral tribunal had effectively granted substantive monetary relief at an interim stage.

The Bench indicated that the extent of appellate interference under Section 37 requires consideration. It noted that the arbitral tribunal had considered factors including prima facie case, balance of convenience and irreparable injury while granting the interim relief.

Lastly, Singhvi highlighted the scale of the underlying project and sought an early hearing. He submitted:

“I have got certified work of ₹4,822 crores. It is the biggest centre running in Dwarka. I have been paid ₹2,354 crores.”

Background

The matter arose from a 2018 EPC contract under which IICECL engaged L&T for Phase I of the India International Convention and Expo Centre project at Dwarka.

Issues subsequently arose over payments, GST claims, force majeure costs and negative variations, with L&T raising claims exceeding Rs. 3,000 crore and IICECL raising counterclaims of nearly Rs. 1,056 crore.

L&T later sought interim release of certified dues relating to stage payments SP-69 and SP-70. The majority of the arbitral tribunal directed IICECL to release approximately Rs. 227 crore, with one arbitrator dissenting.

IICECL challenged the direction before the Delhi High Court, arguing that the tribunal had granted substantive monetary relief on disputed claims through an interim order. L&T contended that the certified amounts were contractually payable.

The Delhi High Court held that Section 17(1)(ii)(e) of the Arbitration and Conciliation Act, 1996 permits interim monetary relief only in appropriate cases and cannot be routinely used to decide disputed claims. It held that the Rs. 227-crore direction exceeded the scope of interim protection and set it aside.